National Bank Of Greece Gets Upgrade As Climate Improves

By Mani
Updated on

National Bank of Greece (ADR) (NYSE:NBG) sports an improved capital position following its equity issuance and capital measures, notes Paul Formanko of JP Morgan.

The JP Morgan Cazenove analyst upgraded NBG to Overweight from Neutral and pegged the price target at € 2.85.

National Bank Of Greece: Improved capital position

The JP Morgan analyst strikes a positive note on National Bank of Greece (ADR) (NYSE:NBG) thanks to various positive factors. For instance, the analyst notes National Bank of Greece’s capital position is improving post €2.5 billion equity issuance and capital measures involve €1.04 billion and with the bank’s pro-forma YE13 B3 CT1 of 11.7%. The JP Morgan analyst notes positive macro trends such as IMF re-affirming its 2.9% growth 15E would support declining NPL formation across the sector.

The following table highlights the changes to National Bank of Greece (ADR) (NYSE:NBG) exclusively driven by the recent capital increase:

National Bank Of Greece: Improved NIM

The JP Morgan analyst notes thanks to reduction in time deposits, National Bank of Greece (ADR) (NYSE:NBG)’s NIM/revenue will continue to expand. Moreover, costs front-loaded into Q4 offer upside in 14-15E.

The following table exhibits the bank’s balance sheet and Profit and Loss snapshot:

NBG-Balance Sheet and P and L snapshot

The analyst also notes several other positives for National Bank of Greece (ADR) (NYSE:NBG). For instance, re-opening of the wholesale markets, benefit from its presence in the high growth Turkish market through a quality and high RoE franchise would augur well for the bank.

The analyst points out that National Bank of Greece didn’t take part in the consolidation process to the same extent as Alpha Bank A.E. (ADR) (OTCMKTS:ALBKY) or Piraeus Bank SA (OTCMKTS:BPIRY), hence its domestic position fell from #1 to #3.

As reported earlier, analysts at Nomura upgraded Alpha Bank from Reduce to Buy, while they were not excited about the country’s largest lender National Bank of Greece.

National Bank Of Greece: Pegged price target at € 2.85

The JP Morgan analyst anticipates Greece business to be profitable in 2014E aided by the Astir Palace sale. By applying the Gordon growth model to 2017 estimates, and using 4% growth rate and 12% cost of equity and 15% normalized RoNAV, the JP Morgan analyst has pegged National Bank of Greece (ADR) (NYSE:NBG)’s Dec 14 price target at €2.85. The analyst has used 12% hurdle rate and discount the Gordon growth derived fair value to Dec 14 levels. The following table captures the analyst’s estimates for National Bank of Greece:

NBG estiamtes

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